PALISADE BIO, INC.

1. Organization and Business

Unless the context indicates or otherwise requires, “Palisade,” “Palisade Bio,” “the Company,” “we,” “us,” and “our” or similar designations in this Annual Report on Form 10-K ("Form 10-K") refer to Palisade Bio, Inc., a Delaware Corporation, and its subsidiaries. Any reference to “common shares” or “common stock,” refers to the Company's $0.01 par value common stock. Any reference to “Leading Biosciences, Inc.” or “LBS” refers to the Company’s operations prior to the completion of its merger with Seneca Biopharma, Inc. ("Seneca") on April 27, 2021 (the "Seneca Merger"). Any reference to “Series A Preferred Stock” refers to the Company's Series A 4.5% Convertible Preferred Stock. Any reference herein that refers to preclinical studies also refers to nonclinical studies.

Description of Business

The Company is a clinical-stage biopharmaceutical company developing next-generation, once-daily, oral phosphodiesterase-4 (“PDE4”) inhibitor prodrugs designed for targeted delivery to the terminal ileum and colon. The Company's lead clinical product candidate, PALI-2108, is being developed as a treatment for patients living with inflammatory bowel disease, or IBD, including ulcerative colitis and Crohn’s disease (“CD”).

Liquidity and Going Concern

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has a limited operating history, and the sales and income potential of the Company’s business and market are unproven. The Company has experienced net operating losses and negative cash flows from operations since its inception. The Company expects to continue to incur net operating losses in the foreseeable future. The successful transition to achieving profitability is dependent upon achieving a level of revenues adequate to support the Company’s costs. There can be no assurances that such profitability will ever be achieved. To fund its operations, the Company has historically relied on primarily equity financings.

On October 2, 2025, the Company closed on an equity offering for net proceeds to the Company of $127.6 million, consisting of gross cash proceeds of $138.0 million less underwriting discounts and commissions and other cash equity issuance costs of approximately $10.4 million (see Note 5, Stockholders' Equity), which as of the date that these consolidated financial statements are issued has significantly increased the Company's available working capital and its ability to fund its operations into the foreseeable future. Although the Company still anticipates incurring net operating losses and negative cash flows from operations into the foreseeable future, considered in the aggregate, management has concluded that because of the net proceeds raised from the recent equity offering in the amount of $127.6 million there is no longer a substantial doubt about the Company's ability to continue as a going concern for a period of one year following the date that these consolidated financial statements are issued.

2. Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

The consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). Dollar amounts contained in these consolidated financial statements are in whole numbers, unless otherwise indicated.

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, LBS and Suzhou Neuralstem Biopharmaceutical Co., Ltd. All the entities are consolidated in the Company's consolidated financial statements and all intercompany activity and transactions, if any, have been eliminated.

Reverse Stock Split

On April 5, 2024, the Company effected a 1-for-15 reverse stock split of its issued and outstanding common stock (the "Reverse Stock Split"). As a result of the Reverse Stock Split, each of the Company’s stockholders received one share of common stock for every 15 shares such stockholder held immediately prior to the effective time of the Reverse Stock Split. The Reverse Stock Split affected all the Company’s issued and outstanding shares of common stock equally. The par value and authorized shares of the Company's common stock were not adjusted as a result of the Reverse Stock Split. The Reverse Stock Split also affected the Company’s outstanding stock-based awards, common stock warrants, and other exercisable or convertible securities and resulted in the shares underlying such instruments being reduced and the exercise price or conversion price being increased proportionately. Unless otherwise noted, all common stock shares, common stock per share data and shares of common stock underlying convertible preferred stock, stock-based awards and common stock warrants included in these consolidated financial statements, including the exercise price or conversion price of such equity instruments, as applicable, have been retrospectively adjusted to reflect the Reverse Stock Split for all periods presented.

Use of Estimates

Thepreparation of financial statements in conformity with U.S. GAAP requires the Company to make estimates, judgments, and assumptions that impact the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the balance sheet, and the reported amounts of expenses during the reporting period. The most significant estimates in the Company’s consolidated financial statements relate to accrued research and development expenses and its contingent consideration obligation. Although these estimates are based on the Company’s knowledge of current events and actions it may undertake in the future, actual results may materially differ from these estimates and assumptions.

Cash and Cash Equivalents

Cash and cash equivalents represent cash in readily available checking and money market accounts. The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equiv alents.

Restricted Cash

As of December 31, 2025 and December 31, 2024, the Company held restricted cash of approximately $55,000 and $26,000, respectively, in a separate restricted bank account as collateral for the Company’s corporate credit card program. The Company has classified these deposits as long-term restricted cash on its consolidated balance sheets.

Deferred Equity Issuance Costs

Deferred equity issuance costs consist of the legal, accounting and other direct and incremental costs incurred by the Company related to its equity offerings, if not yet finalized as of the balance sheet date, or shelf registration statement. These costs will be charged against additional paid-in capital as a cost of the future equity issuances to which they relate. During the year ended December 31, 2025, the Company expensed approximately $75,000 of deferred equity issuance costs recognized as of December 31, 2024 that were associated with its shelf registration statement that expired in April of 2025 in general and administrative expenses in the consolidated statements of operations. During the year ended December 31, 2024, the Company charged deferred equity issuance costs of approximately $37,000 recognized as of December 31, 2023 against the additional paid-in capital recognized in conjunction with the February 2024 Warrant Inducement (see Note 5, Stockholders' Equity).

Concentration of Credit Risk

Financial instruments, which potentially subject the Company to concentration of credit risk, consist primarily of cash and cash equivalents. The Company maintains deposits in federally insured financial institutions and in money market accounts, and at times balances may exceed federally insured limits. Management believes that the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held and historically the Company has not experienced any losses in such accounts.

Fair Value of Financial Instruments

The Company follows Accounting Standards Codification ("ASC") 820, Fair Value Measurements and Disclosures, which among other things, defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement determined based on assumptions that market participants would use in pricing an asset or liability.

As a basis for considering such assumptions, a three-tier fair value hierarchy has been established, which prioritizes the inputs used in measuring fair value as follows:

Level 1: observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2: inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

Level 3: unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions, which reflect those that a market participant would use.

Further information on the fair value of the Company's financial assets and liabilities can be found at Note 4, Fair Value Measurements.

Derivative Financial Instruments

The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. The Company values its derivatives using the Black-Scholes option pricing model or other acceptable valuation models. Derivative instruments, if any, are valued at inception, upon events such as an exercise of the underlying financial instrument, and at subsequent reporting periods. The classification of derivative instruments, including whether such instruments should be recorded as liabilities, is reassessed at the end of each reporting period.

The Company reviews the terms of debt instruments, equity instruments, and other financing arrangements to determine whether there are embedded derivative features, including embedded conversion options that are required to be bifurcated and accounted for separately as a derivative financial instrument. Additionally, in connection with the issuance of financing instruments, the Company may issue freestanding options and common stock warrants.

The Company accounts for its common stock warrants in accordance with ASC 480, Distinguishing Liabilities from Equity ("ASC 480") and ASC 815, Derivatives and Hedging (“ASC 815”). Based upon the provisions of ASC 480 and ASC 815, the Company accounts for common stock warrants as liabilities if the warrant requires net cash settlement or gives the holder the option of net cash settlement, or if it fails the equity classification criteria. The Company accounts for common stock warrants as equity if the contract requires physical settlement or net physical settlement or if the Company has the option of physical settlement or net physical settlement and the warrants meet the requirements to be classified as equity. Common stock warrants classified as liabilities, if any, are initially recorded at fair value on the grant date and remeasured at fair value at each balance sheet date with the offsetting adjustments recorded in change in fair value of warrant liability within the consolidated statements of operations. If the terms of a common stock warrant previously classified as a liability are amended and pursuant to such amendment meet the requirements to be classified as equity, the common stock warrants are reclassified to equity at the fair value on the date of the amendment and are not subsequently remeasured. Common stock warrants classified as equity are recorded on a relative fair value basis when they are issued with other equity-classified financial instruments.

Leases

In accordance with ASC 842, Leases, the Company assesses contracts for lease arrangements at inception. Operating right-of-use (“ROU”) assets and liabilities are recognized at the lease commencement date equal to the present value of future lease payments using the implicit, if readily available, or incremental borrowing rate based on the information readily available at the commencement date. ROU assets include any lease payments as of commencement and initial direct costs but exclude any lease incentives. Lease and non-lease components are generally accounted for separately and the Company recognizes operating lease expense straight-line over the term of the lease.

License Revenue

The Company uses the revenue recognition guidance established by ASC 606, Revenue From Contracts With Customers (“ASC 606”). When an agreement falls under the scope of other standards, such as ASC 808, Collaborative Arrangements, the Company will apply the recognition, measurement, presentation, and disclosure guidance in ASC 606 to the performance obligations in the agreements if those performance obligations are with a customer. As of December 31, 2025 and 2024, the Company does not have any collaborative arrangements with counterparties that are also considered customers. For arrangements that include amounts to be paid to the Company upon the achievement of certain development milestones of technology licensed by the Company, the Company recognizes such license revenue using the most likely method. At the end of each reporting period, the Company re-evaluates the probability or achievement of any potential milestones and any related constraints, and if necessary, adjusts its estimates of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenue in the period of adjustment.

On September 1, 2023, the Company and Giiant Pharma, Inc. ("Giiant") entered into a research collaboration and license agreement (the “Giiant License Agreement”)(see Note 7, Collaborations and License Agreements). Pursuant to the Giiant License Agreement, the Company incurred a contingent consideration obligation related to future milestone payments, which is recognized as a liability measured at fair value, and ongoing royalty payments of a mid-single-digit percentage of the adjusted gross proceeds, as defined in the Giiant License Agreement, upon the sales or sublicenses third parties of any products developed from the assets licensed under the Giiant License Agreement. Because the contingent consideration associated with the milestone payments may be settled in shares of the Company's common stock solely at the election of the Company, the Company has determined it should be accounted for under ASC 480 and accordingly the Company has recognized it as a liability measured at its estimated fair value. At the end of each reporting period, the Company re-measures the contingent consideration obligation to its estimated fair value and any resulting change is recognized in research and development expenses in the consolidated statements of operations. The Company has determined that the contingent consideration associated with the royalty payments should be recognized as a liability when they are probable and estimable, in accordance with ASC 450, Contingencies ("ASC 450").

Research and development expenses consist of salaries and employee-related expenses including stock-based compensation costs, and, to the extent applicable, preclinical and translational science costs, clinical trial costs, costs related to acquiring and manufacturing clinical trial materials, regulatory expenses and contract services. All research and development costs are expensed as incurred pursuant to ASC 730, Research and Development Costs.

Research and development expenses related to clinical studies, chemistry, manufacturing and controls ("CMC") and translational science are based on estimates of the services received and efforts expended pursuant to the Company’s contract arrangements. The financial terms of these contract arrangements are subject to negotiation, vary from contract to contract, and may result in uneven payment flows. Payments under some of these contracts depend on factors such as the successful enrollment of patients, site initiation and the completion of clinical milestones. The Company makes estimates of its accrued expenses as of each balance sheet date in its consolidated financial statements based on facts and circumstances known at that time. The Company accrues for research and development expenses for which the estimated services have been provided but the Company has not yet been invoiced as of the balance sheet date. There may be instances in which payments made to the Company’s service providers will temporarily exceed the level of services provided and result in a prepayment of the research and development expenses. If the actual timing of the performance of services or the level of effort varies from its estimate, the Company adjusts the accrual or prepaid expense balance accordingly.

Pursuant to situations whereby the Company performs any research and development or manufacturing activities under a co-development agreement, and the co-development partner is not considered a customer under ASC 606, the Company records the expense reimbursements from the co-development partner as a reduction to research and development expense once the reimbursement amount is approved for payment by the co-development partner.

Expense payments made to Giiant pursuant to the terms of the Giiant License Agreement for qualifying development costs are expensed only as the associated research and development costs are incurred or other aspects of the drug development or related activities are achieved. In instances where the expense determined to be recognized exceeds the payments made to the Giiant, the Company recognizes an accrual of joint development expenses. In addition, there may be instances in which payments made to Giiant will temporarily exceed the level of services provided, which results in a prepayment of the joint development expenses. The Company records expense payments from Giiant, if any, as a reduction to research and development expense once the expense payments are realized or realizable, which is when Company receives the cash or has an undisputed claim to the cash that is probable of collection, pursuant to the terms of the Giiant License Agreement and the principles of ASC 450. The Company has determined that Giiant is not considered a customer under ASC 606.

Loss Contingencies

From time to time, the Company may be involved in various lawsuits, legal proceedings, or claims that arise in the ordinary course of business. In accordance with ASC 450, the Company recognizes a loss contingency provision in its financial statements when it concludes that a contingent liability is probable, and the amount thereof is estimable. For matters where a loss is not probable, or a probable loss cannot be reasonably estimated, no liability is recorded. Costs associated with the Company’s involvement in legal proceedings are expensed as incurred and any insurance proceeds are recognized as a reduction in expense when they are realized or realizable, which is when Company receives the cash or has an undisputed claim to the cash that is probable of collection. Provisions for loss contingencies are recorded in Selling, general and administrative expense in the Company’s consolidated statements of operations and the related accruals are recorded in Accrued liabilities in the Company’s consolidated balance sheets.

Income Taxes

The Company follows ASC 740, Income Taxes (“ASC 740”) in reporting deferred income taxes. ASC 740 requires a company to recognize deferred tax assets and liabilities for expected future income tax consequences of events that have been recognized in the Company’s consolidated financial statements. Under this method, deferred tax assets and liabilities are determined based on temporary differences between financial statement carrying amounts and the tax basis of assets and liabilities using enacted tax rates in the years in which the temporary differences are expected to reverse. Valuation allowances are provided if, based on the weight of available evidence, it is more likely than not that some of or all the deferred tax assets will not be realized.

The Company accounts for uncertain tax positions pursuant to ASC 740, which prescribes a recognition threshold and measurement process for financial statement recognition of uncertain tax positions taken or expected to be taken in a tax return. If the tax position meets this threshold, the benefit to be recognized is measured as the tax benefit having the highest likelihood of being realized upon ultimate settlement with the taxing authority. The Company recognizes interest accrued related to unrecognized tax benefits and penalties in the provision for income taxes.

Stock-Based Compensation

The Company’s stock-based compensation generally includes service-based restricted stock units (“RSUs”), stock options, and from time to time also includes market-based performance restricted stock units (“PSUs”). The Company accounts for forfeitures as they occur for each type of award as a reduction of expense. Stock-based compensation expense related to service-based RSUs is based on the market value of the underlying stock on the date of grant and the related expense is recognized ratably over the requisite service period, which is usually the vesting period. RSU awards generally vest over three orfour years and RSU awards to directors of the Company's board of directors (the "Board") cliff vest after a period ofone year. Vesting of RSUs could be accelerated in the event of retirement, disability, or death of a participant, or change in control of the Company, as defined in the individual RSU agreements or employment agreements. Pursuant to ASC 718, Compensation - Stock Compensation("ASC 718"), the Company assesses for liability-classification at grant date and each subsequent balance sheet date any RSU awards that include cash settlement features whereby the award may be settled, at the Company's sole election, in shares of the Company's common stock or in cash based on the fair market value of the Company's common stock on the applicable vesting date. Pursuant to situations in which the Company concludes it has both the intent and ability to settle RSU awards that include cash settlement features in shares of the Company's common stock, based both on the RSU awards vesting schedule and perfunctory increases in the number of shares of common stock available for issuance under the evergreen provisions of the underlying equity incentive plan, the Company classifies the RSU award as equity.

Stock option awards are generally granted with an exercise price equal to the market price of Company’s stock at the date the grants are awarded and a term as determined by the Company's Board but, generally not to exceed ten-years. Stock option awards to employees vest in equal proportions each quarter over three years and stock option awards to directors of the Company's Board cliff vest after a period of one year. Vesting of stock options could be accelerated in the event of retirement, disability, or death of a participant, or change in control of the Company, as defined in the individual stock option agreements or employment agreements. Stock-based awards are valued as of the measurement date, which is the grant date, and are generally amortized on a straight-line basis over the requisite vesting period for all awards. The Company's equity incentive plans allow for the issuance of both incentive stock options and non-statutory stock options. The Company estimates the fair value of employee and non-employee stock option grants using the Black-Scholes option pricing model. The determination of the fair value of stock-based payment awards on the date of grant using the Black-Scholes option pricing model is affected by the Company's stock price as well as assumptions, which include the expected term of the award, the expected stock price volatility, risk-free interest rate, and expected dividends over the expected term of the award. Stock-based compensation expense represents the cost of the estimated grant date fair value of employee and non-employee stock option grants recognized ratably over the requisite service period of the awards, which is usually the vesting period. For PSUs with vesting subject to market conditions, the fair value of the award is determined at grant date using the Monte Carlo simulation model, and expense is recognized ratably over the derived service period regardless of whether the market condition is satisfied. The Monte Carlo simulation model considers a variety of potential future scenarios under the market condition vesting criteria, including but not limited to share prices for the Company and its peer companies in a selected market index.

The Company does not recognize any share-based compensation expense related to conditional RSUs, stock options, or PSUs that are subject to shareholder approval. When and if approval is obtained, the Company recognizes share-based compensation expense related to the conditional equity grants ratably to the vesting of shares over the remaining requisite service period.

The Company offers its employees an opportunity to participate in its shareholder approved Palisade Bio, Inc. 2021 Employee Stock Purchase Plan (the "2021 ESPP"). The Company estimates the fair value of 2021 ESPP awards on the first day of the offering period using the Black-Scholes option pricing model. The estimated fair value of 2021 ESPP awards is amortized on a straight-line basis over the requisite service period of the award. The Company reviews, and when deemed appropriate, updates the assumptions used on a periodic basis. The Company utilizes its estimated volatility in the Black-Scholes option pricing model to determine the fair value of 2021 ESPP awards.

Comprehensive Loss

Comprehensive loss is defined as a change in equity during a period from transactions and other events and circumstances from non-owner sources. The Company’s comprehensive loss was the same as its reported net loss for all years presented.

Recently Adopted Accounting Pronouncements

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures ("ASU 2023-09"), which prescribes standard categories for the components of the effective tax rate reconciliation and requires disclosure of additional information for reconciling items meeting certain quantitative thresholds, requires disclosure of disaggregated income taxes paid, and modifies certain other income tax-related disclosures. The Company retrospectively adopted ASU 2023-09 in the fourth quarter of 2025. The adoption of ASU 2023-09 resulted in additional financial statement disclosures and had no impact on the Company’s results of operations or financial condition. See Note 11, Income Taxes, which includes the disclosures resulting from the adoption of ASU 2023-09.

Recently Issued Accounting Pronouncements

In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses ("ASU 2024-03"), which is intended to improve disclosures about a public business entity’s expenses by requiring disaggregated disclosure, in the notes to the financial statements, of certain categories of expenses included in the financial statements. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. ASU 2024-03 may be applied either on a prospective or retrospective basis, and early adoption is permitted. The Company is currently evaluating the potential impact of the adoption of ASU 2024-03 on its consolidated financial statement disclosures.

Recently Enacted Tax Legislation

The One Big Beautiful Bill Act (“OBBBA”) was enacted in the United States ("U.S") on July 4, 2025. The OBBBA legislation provides for the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, revisions to the international tax framework and the reinstatement of favorable tax treatment for certain business provisions. Additionally, the OBBBA restores the current deduction for domestic research and experimentation ("R&E") expenses under Section 174 for businesses that have previously capitalized domestic R&E expenses for taxable years.

3. Balance Sheet Details

Prepaid expenses and other current assets consisted of the following (in thousands):

Accrued liabilities consisted of the following (in thousands):

4. Fair Value Measurements

The following tables reflect the Company's fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2025 and December 31, 2024 (in thousands):

Cash and Cash Equivalents

The Company invests its excess cash in money market funds that are classified as level 1 in the fair value hierarchy due to their short-term maturity of three months or less and are measured at fair value based on quoted prices in active markets for identical assets.

Share Liability and Derivative Liability

The Company's share liability and derivative liability (refer to Note 5, Stockholders' Equity) are each remeasured and carried at fair value at each balance sheet date based on the market value of the Company's common stock, which is a level 1 input.

Pursuant to the Giiant License Agreement, the Company incurred a contingent consideration obligation related to future milestone payments. The Company has an obligation to make contingent consideration payments to Giiant, in either cash or shares of the Company’s common stock solely at the Company’s election, upon the achievement of development milestones. On August 2, 2024, the Company and Giiant entered into an amendment to the Giiant License Agreement, which among other things, reduced the milestone payments due to Giiant upon the achievement of certain development milestones (see Note 7, Collaborations and License Agreements, for further details).

The Company’s contingent consideration obligation is carried at fair value based on level 3 inputs. The fair value of the contingent consideration obligation is determined using a probability-based model that estimates the likelihood of success in achieving each of the defined milestones that is then discounted to present value using the Company's incremental borrowing rate. The fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement as defined in fair value measurement accounting. The significant assumptions used in the calculation of the fair value as of December 31, 2025 included a discount rate of 15.26% and management's updated projections of the likelihood of success in achieving the one remaining defined milestone based on empirical, published industry data.

The following table summarizes the activity of the Company’s Level 3 contingent consideration obligation, which is measured at fair value on a recurring basis (in thousands):

On October 16, 2025, the first of the Giiant Milestone Payments (see Note 7, Collaborations and License Agreements, for further details) was achieved with the dosing of the first patient in the Company's Phase 1b clinical trial of PALI-2108 in a Fibrostenotic Crohn's Disease ("FSCD") cohort. Pursuant to the terms of the Giiant License Agreement, the Company settled this Giiant Milestone Payment in cash in the amount of $235,000 within 30 days of the date the milestone was met. The remaining amount of the contingent consideration liability of approximately $266,000 was recognized as a noncurrent liability in Contingent consideration obligation in the consolidated balance sheet as of December 31, 2025 since it is not expected to be settled within one-year of the balance sheet date. As of December 31, 2024, the entire amount of the contingent consideration obligation of approximately $150,000 was classified as a noncurrent liability in Contingent consideration obligation in the consolidated balance sheet.

Financial Instruments Not Required to be Remeasured at Fair Value

The Company's other financial assets and liabilities, including restricted cash, other current receivables, accounts payable, and accrued liabilities are not remeasured to fair value, as the carrying amount of each approximates its fair value due to the short-term nature of these instruments. The carrying value of the Company’s insurance financing debt also approximates its fair value as of December 31, 2025 and December 31, 2024 due to the short-term nature of the instrument and the market rate of interest, which is based on level 2 inputs.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

None of the Company’s non-financial assets or liabilities are recognized at fair value on a nonrecurring basis.

5. Stockholders’ Equity

Classes of Stock

Common Stock

On December 3, 2025, the Company held a special meeting at which time the Company's stockholders approved an amendment to the Company's Amended and Restated Certificate of Incorporation to increase the total number of authorized shares of the Company's $0.01 par value common stock from 280,000,000 shares to 300,000,000 shares. The Company subsequently amended its Amended and Restated Certificate of Incorporation to reflect the increase. As of December 31, 2025, the Company was authorized to issue 300,000,000 shares of $0.01 par value common stock. Each share of common stock entitles the holder thereof to one vote on each matter submitted to a vote at a meeting of stockholders.

On April 5, 2024, the Company effected the Reverse Stock Split. Accordingly, each of the Company’s stockholders received one share of the Company's common stock for every 15 sharesof the Company's common stock that such stockholder held immediately prior to the effective time of the Reverse Stock Split. The Reverse Stock Split affected all of the Company’s issued and outstanding shares of the Company's common stock equally. The Reverse Stock Split also affected the Company’s outstanding stock-based awards, warrants and other exercisable or convertible securities and resulted in the shares underlying such instruments being reduced and the exercise price or conversion price being increased proportionately by the Reverse Stock Split ratio. No fractional shares were issued as a result of the Reverse

Stock Split with any fractional shares that would have otherwise resulted from the Reverse Stock Split paid in cash, at an amount equal to the resulting fractional interest in one share of the Company's common stock that the stockholder would otherwise be entitled, multiplied by the closing trading price of the Company's common stock on April 5, 2024. The amount of cash paid for fractional shares was immaterial to the Company's financial statements.

As a result of the Reverse Stock Split, on April 5, 2024 the number of issued and outstanding shares of the Company's common stock was adjusted from 12,771,015 shares to approximately 851,302 shares.

Preferred Stock

As of December 31, 2025, the Company was authorized to issue 7,000,000 shares of $0.01 par value preferred stock of which 1,000,000 shares have been designated as Series A 4.5% Convertible Preferred Stock ("Series A Convertible Preferred Stock"), of which 200,000 shares are issued and outstanding and are convertible into an aggregate of 8 shares of the Company's common stock.

Recent Equity Offerings

Crohn's and Colitis Foundation Research Program Funding Agreement

On December 17, 2025 (the “Execution Date”), the Company entered into a Research Program Funding Agreement (the “CCF Funding Agreement”) with the Crohn’s & Colitis Foundation (the “CCF”), in which the CCF agreed to provide up to a $0.5 million investment to support the Company’s Phase 1b research program related to PALI-2108.

The funding is payable in three tranches (“CCF Milestone Amount”) subject to the achievement of specified milestones. The first milestone (“CCF Milestone 1”) is in the amount of $250,000 and is due within approximately 45 days of the Execution Date. The second milestone (“CCF Milestone 2”) is in the amount of $200,000 and is due based on achievement of certain research deliverables. The third milestone (“CCF Milestone 3”) is in the amount of $50,000 and is due upon the final Phase 1b study report. CCF Milestone 1, CCF Milestone 2, and CCF Milestone 3, are collectively referred to as the “Milestone(s)”. The payments from the CCF are due within approximately 45 days of each Milestone achievement.

For each CCF Milestone payment received, within 30 days the Company must issue shares of its common stock (the “CCF Shares”) equal to the CCF Milestone Amount divided by 80% of the closing price of the Company’s common stock on the date of the respective Milestone cash receipt date.

For six years from the Execution Date, the CCF has a put option (the "CCF Put Option") on the CCF Shares whereby if the Company chooses to terminate active development of the Phase 1b research program related to PALI-2108, as defined in the CCF Funding Agreement, for reasons other than scientific failure, the CCF may require the Company to repurchase the CCF Shares at their original issue price. Pursuant to the CCF Funding Agreement, the CCF Put Option expires once the underlying CCF Shares exceed three times the closing price at which they were issued. The Company determined that although the CCF Put Option meets the definition of a derivative financial instrument pursuant to ASC 815, it also meets the equity scope exception for derivative accounting and therefore is not required to be bifurcated from the underlying CCF Shares and recognized separately.

Pursuant to ASC 480, the Company has recognized CCF Milestone 1 as a financial instrument that requires liability classification and to be initially recorded at fair value. The CCF Milestone 1 liability is expected to be settled within 75 days of the Execution Date, and therefore the subsequent change in fair value for the year ended December 31, 2025 is immaterial. On the Execution Date, the Company recognized a $250,000 other current receivable for the amount due from CCF in Prepaid and other current assets in the consolidated balance sheets. The Company recognized a $250,000 non-cash financing activity for Proceeds from the issuance of common stock included in other current receivables in theconsolidated statement of cash flows for the year ended December 31, 2025. Also on the Execution Date, the Company recognized the fair value of CCF Milestone 1 of $312,500 in Share liability in the consolidated balance sheets. The Company recognized a $250,000 non-cash financing activity for the Fair Value of common shares to be issued included in share liability in theconsolidated statement of cash flows for the year ended December 31, 2025. There was no change in the fair value of the Share liability between the Execution Date and December 31, 2025.

Pursuant to ASC 815, CCF Milestone 2 and CCF Milestone 3 were determined to be derivative liabilities initially recognized at fair value, with subsequent changes in fair value measured at each reporting period. On the Execution Date, the fair value of CCF Milestone 2 was determined to be $50,000 and the fair value of CCF Milestone 3 at the Execution Date was determined to be $12,500. Both amounts are recognized in Derivative liability in the consolidated balance sheets. There was no change in the fair value of the Derivative liability between the Execution Date and December 31, 2025.

The difference between the initial fair value of the $312,500 Share liability and the $250,000 current receivable for the amount due from CCF associated with CCF Milestone 1 of $62,500, as well as the initial fair value of the derivative liabilities associated with CCF Milestone 2 and CCF Milestone 3 of $62,500, has been recognized in Other income, net, at the consolidated statement of operations for the year ended December 31, 2025 and as a Non-cash expense for the issuance of common stock in adjustments to reconcile net loss to net cash used in operating activities at the consolidated statement of cash flows for the year ended December 31, 2025.

October 2025 Offering

On October 1, 2025, the Company entered into an underwriting agreement (the “October 2025 Underwriting Agreement”) pursuant to which the Company agreed to issue and sell, in an underwritten public offering by the Company (the “October 2025 Offering”), (a)87,526,279 shares of common stock, par value $0.01 per share, at a public offering price of $0.70 per share, and (b)83,914,280 pre-funded warrants to purchase one share of the Company's common stock, par value $0.01 per share, at a public offering price of $0.6999 per share (“October 2025 Offering Pre-funded Common Stock Warrant(s)”). The October 2025 Offering Pre-funded Common Stock Warrants were issued in lieu of shares of common stock to certain purchasers whose purchase of shares of common stock in the October 2025 Offering would otherwise result in the purchaser, together with its affiliates and certain related parties, beneficially owning more than 4.99% (or, at the election of the purchaser,9.99%) of the Company’s outstanding common stock immediately following the closing of the offering. The October 2025 Offering Pre-funded Common Stock Warrants are exercisable immediately and may be exercised at any time until all of the pre-funded warrants are exercised in full. Each October 2025 Offering Pre-funded Common Stock Warrant has an exercise price of $0.0001 per share, and has a perpetual term. In addition, pursuant to the October 2025 Underwriting Agreement, the Company granted the sole underwriter a 45-day over-allotment option to purchase up to 25,714,285 additional shares of the Company's common stock at the public offering price, less underwriting discounts and commissions.

The Company issued common stock warrants to representatives of the sole underwriter in the October 2025 Offering to purchase an aggregate 7,878,927 shares of common stock (the “October 2025 Representative Warrants”). The October 2025 Representative Warrants have an exercise price of $1.155 per share and a term offive years from the date of issuance. The grant date fair value of the October 2025 Representative Warrants of approximately $10.9 millionwas recognized by the Company as an equity issuance cost, which reduced the additional paid-in capital recognized from the October 2025 Offering.

The October 2025 Offering closed on October 2, 2025 for net proceeds to the Company of $127.6 million, consisting of gross cash proceeds of $138.0 million less underwriting discounts and commissions and other cash equity issuance costs of approximately $10.4 million, which excludes the grant date fair value of the October 2025 Representative Warrants. At closing, the Company issued (a)113,240,564 shares of common stock, par value $0.01 per share, which included the full exercise of the underwriter’s over-allotment option to purchase 25,714,285 additional shares of common stock, at a public offering price of $0.70 per share, and (b)83,914,280 October 2025 Offering Pre-funded Common Stock Warrants.

December 2024 Offering

On December 12, 2024, the Company entered into an underwriting agreement (the “December 2024 Underwriting Agreement”) pursuant to which the Company agreed to issue and sell, in an underwritten public offering by the Company (the “December 2024 Offering”), (a)158,000 Class A Units at a public offering price of $1.525 per Class A Unit (the “Class A Units”), with each Class A Unit consisting of (i) one share of the Company’s common stock, par value $0.01 per share, and (ii) one warrant to purchase one share of the Company's common stock at an exercise price per share of $1.40 and a term offive years from the date of issuance(“December 2024 Offering Common Stock Warrants”) and (b)3,120,688 Class B Units at a public offering price of $1.5249 per Class B Unit (the “Class B Units”, and collectively with the Class A Units, the “Units”), with each Class B Unit consisting of (i) one pre-funded warrant to purchase one share of the Company's common stock being immediately exercisable, having an exercise price of $0.0001 per share, and a perpetual term (“December 2024 Offering Pre-funded Common Stock Warrant(s)”) and (ii) one December 2024 Offering Common Stock Warrant. In addition, pursuant to the Underwriting Agreement, the Company granted the sole underwriter a 45-day over-allotment option to purchase up to 491,803 additional shares of the Company's common stock and/or December 2024 Offering Common Stock Warrants. The over-allotment option expired and was not exercised by the underwriter.

The Company issued warrants to representatives of the sole underwriter in the December 2024 Offering to purchase an aggregate 196,721 shares of common stock (the “December 2024 Representative Warrants”). The December 2024 Representative Warrants have substantially the same terms as the December 2024 Offering Common Stock Warrants, except that the exercise price of each of the December 2024 Representative Warrants is $2.51625 per share. The grant date fair value of the December 2024 Representative Warrants of approximately $0.3 million was recognized by the Company as an equity issuance cost, which reduced the additional paid-in capital recognized from the December 2024 Offering.

The December 2024 Offering closed on December 13, 2024 for net cash proceeds to the Company of approximately $4.1 million, consisting of gross cash proceeds of $5.0 million less underwriting discounts and commissions and other cash equity issuance costs of approximately $0.9 million, which excludes the grant date fair value of the December 2024 Representative Warrants and the incremental fair value of the Repriced Warrants of approximately $0.3 million, described below.

On December 12, 2024, the Company entered into a warrant amendment agreement (the “Warrant Amendment Agreement”) whereby the Company, contemporaneously with and contingent with the closing of the December 2024 Offering, reduced the exercise price of 1,040,217 outstanding common stock warrants (the “Repriced Warrants”) held by an investor that participated in the December 2024 Offering that expire between July 31, 2027 and May 6, 2031. The Repriced Warrants had their exercise price reduced to $1.40 per share. Other than the reduction in exercise price, the terms of the Repriced Warrants remain the same and unchanged.

The Warrant Amendment Agreement is considered a modification of the Repriced Warrants under the guidance of ASC 815-40, Derivatives and Hedging—Contracts in Entity's Own Equity ("ASC 815-40"). The modification is consistent with the equity issuance classification under that guidance as the reason for the Company's repricing of the warrants was to meet a condition of the holder's participation in the December 2024 Offering, which raised equity capital and generated gross cash proceeds for the Company of approximately $5.0 million. As pursuant to the guidance of ASC 480 and ASC 815 the Repriced Warrants were classified as equity instruments before and after the modification, and as the modification is directly attributable to an equity offering, the Company recognized the effect of the modification of approximately $0.3 million as an equity issuance cost charged against the additional paid-in capital recognized in the December 2024 Offering. The amount of the equity issuance cost recognized for the modification of the Repriced Warrants was determined using the Black-Scholes option pricing model as the incremental fair value of the Repriced Warrants as compared to the fair value of the warrants immediately prior to their modification.

May 2024 Offering

On May 1, 2024, the Company entered into a securities purchase agreement with an institutional investor, pursuant to which the Company sold in a private placement, (i)85,100 shares of common stock at a purchase price per share of $6.5015, (ii)530,142 pre-funded warrants to purchase shares common stock at a purchase price of $6.5014 per pre-funded warrant, with such pre-funded warrants being immediately exercisable, having an exercise price of $0.0001 per share, and a perpetual term, and (iii) common stock warrants to purchase 922,863 shares of the common stock at an exercise price of $6.314 per share and a term ofseven years from the date of issuance (the "May 2024 Common Stock Warrants") (collectively, the “May 2024 Offering”).

The Company issued warrants to the placement agent in the May 2024 Offering to purchase an aggregate 36,914 shares of common stock (the “May 2024 Placement Agent Warrants”). The May 2024 Placement Agent Warrants have substantially the same terms as the May 2024 Common Stock Warrants, except that the exercise price of each of the May 2024 Placement Agent Warrants is $10.727 per share and the term isfive years from issuance. The fair value of the May 2024 Placement Agent Warrants was recognized by the Company as an equity issuance cost, which reduced the additional paid-in capital recognized from the May 2024 Offering.

The May 2024 Offering closed on May 6, 2024 for net cash proceeds to the Company of approximately $3.5 million, consisting of gross cash proceeds of $4.0 million less cash equity issuance costs of approximately $0.5 million, which excludes the grant date fair value of the May 2024 Placement Agent Warrants of approximately $0.2 million.

Common Stock Warrants and Warrant Exercises

July 2025 Warrant Inducement

On July 23, 2025, the Company entered into a warrant inducement agreement (the “July 2025 Warrant Inducement Agreement”) with an accredited and institutional holder (the “July 2025 Warrant Holder”) of certain of the Company’s outstanding common stock warrants, including: (i) common stock warrants issued on May 10, 2022, which were transferred to the July 2025 Warrant Holder in January 2022 (the “January 2022 Warrants”), (ii) common stock warrants issued on February 1, 2024 (the “February 2024 Warrants”), (iii) common stock warrants issued on May 6, 2024 (the “May 2024 Warrants”), and (iv) the December 2024 Offering Common Stock Warrants, (collectively, the “July 2025 Existing Warrant(s)”) to exercise the July 2025 Existing Warrants to purchase up to an aggregate of 4,318,905 shares of the Company's common stock. Pursuant to the July 2025 Warrant Inducement Agreement, the exercise price of each July 2025 Existing Warrant exercised was reduced from $1.40 per share to $0.9047 per share. In consideration for the immediate exercise of the July 2025 Existing Warrants, the July 2025 Warrant Holder received new unregistered warrants (the “July 2025 Replacement Warrants”) to purchase shares of common stock in a private placement. Pursuant to the July 2025 Warrant Inducement Agreement, the July 2025 Warrant Holder received two July 2025 Replacement Warrants for each July 2025 Existing Warrant exercised. The July 2025 Replacement Warrants are exercisable into an aggregate of up to 8,637,810 shares of common stock beginning on the effective date of stockholder approval of the issuance of common stock shares underlying the July 2025 Replacement Warrants (the “Warrant Stockholder Approval”), at an exercise price of $0.9047 per share, and a term of exercise equal to five years from the date of Warrant Stockholder Approval (the transaction in its entirety, the "July 2025 Warrant Inducement Transaction"). The shares of common stock issuable upon the exercise of the July 2025 Replacement Warrants have subsequently been registered by the Company. On December 3, 2025, the Company convened a special meeting of stockholders at which time it received Warrant Stockholder Approval and the July 2025 Replacement Warrants became immediately exercisable.

The July 2025 Warrant Holder exercised an aggregate of 4,318,905 July 2025 Existing Warrants consisting of: (i)3,000 January 2022 Warrants, (ii)114,354 February 2024 Warrants, (iii)922,863 May 2024 Warrants, and (iv)3,278,688 December 2024 Warrants. As a result of the exercises of the July 2025 Existing Warrants, the Company issued an aggregate of 4,318,905 shares of its common stock and 8,637,810 July 2025 Replacement Warrants. The July 2025 Warrant Inducement Transaction closed on July 25, 2025 with the Company receiving net cash proceeds of approximately $3.4 million consisting of gross cash proceeds of $3.9 million, less cash equity issuance costs of approximately $0.5 million.

The July 2025 Warrant Inducement Transaction, which resulted in the lowering of the exercise price of the July 2025 Existing Warrants and the issuance of the July 2025 Replacement Warrants, is considered a modification of the July 2025 Existing Warrants under the guidance of ASC 815-40. The modification is consistent with the Equity Issuance classification under that guidance as the reason for the modification was to induce the holders of the July 2025 Existing Warrants to cash exercise their July 2025 Existing Warrants, resulting in the imminent exercise of the July 2025 Existing Warrants, which raised equity capital and generated gross cash proceeds for the Company of approximately $3.9 million. As pursuant to the guidance of ASC 480 and ASC 815-40 the July 2025 Existing Warrants and were classified as equity instruments before and after the modification, and as the modification is directly attributable to an equity offering, the Company recognized the effect of the modification of approximately $8.6 million as an equity issuance cost charged against the additional paid-in capital recognized from the associated warrant exercises. The amount of the equity issuance cost recognized for the warrant modification was determined using the Black-Scholes option pricing model as the incremental fair value of the modified July 2025 Existing Warrants and additional July 2025 Replacement Warrants issued as compared to the fair value of the original July 2025 Existing Warrants immediately prior to their modification.

The solicitation agent fees associated with the July 2025 Warrant Inducement Transaction consisted of: (i) a cash fee equal to 9% of the gross proceeds received by the Company, (ii) a common stock warrant to purchase such number of shares of common stock equal to 6% of the aggregate number of shares issued pursuant to the exercise of the July 2025 Existing Warrants, or a total of 259,134 common stock warrants, with an exercise price of $1.49 per share, and a term offive years from issuance (the "July 2025 Solicitation Agent Warrants"), and (iii) $75,000 of out-of-pocket expenses. The fair value of the July 2025 Solicitation Agent Warrants was recognized by the Company as an equity issuance cost, which reduced the additional paid-in capital recognized from the issuance of common stock in connection with the exercise of the July 2025 Existing Warrants.

Total equity issuance costs recognized in the July 2025 Warrant Inducement Transaction of $9.3 million include cash equity issuance costs of $0.5 million, non-cash warrant modification costs of approximately $8.6 million, and non-cash issuance costs associated with the July 2025 Solicitation Agent Warrants of $0.2 million.

February 2024 Warrant Inducement

On January 30, 2024, the Company entered into warrant inducement agreements (the “February 2024 Warrant Inducement Agreements”) with certain accredited and institutional holders (collectively, the “February 2024 Warrant Holders”) of certain of the Company’s remaining outstanding common stock warrants, including: (i) common stock warrants issued on May 10, 2022 (the "May 2022 Warrants"), (ii) common stock warrants issued on January 4, 2023 (the “January 2023 Warrants”), and (iii) common stock warrants issued on April 5, 2023 (the “April 2023 Warrants”), as well as certain outstanding Series 2 warrants issued on August 16, 2022 (the "Series 2 Warrants") (collectively, the “February 2024 Existing Warrant(s)”). Pursuant to the February 2024 Warrant Inducement Agreements, the exercise price of each of the February 2024 Existing Warrants exercised was reduced to $10.97 per share. Each of the February 2024 Warrant Holders that exercised its February 2024 Existing Warrants pursuant to the February 2024 Warrant Inducement Agreements, received one replacement warrant to purchase one share of the Company's common stock (the “February 2024 Replacement Warrants”) for each February 2024 Existing Warrant exercised (in its entirety, the "February 2024 Warrant Inducement").

The February 2024 Replacement Warrants were exercisable immediately, have an original exercise price per share of $10.97, and expire five years from the date of issuance, which was February 1, 2024.

The February 2024 Warrant Holders collectively exercised an aggregate of 228,162 February 2024 Existing Warrants consisting of: (i)4,865 May 2022 Warrants, (ii)4,267 Series 2 Warrants, (iii)67,511 January 2023 Warrants, and (iv)151,519 April 2023 Warrants. As a result of the exercises of the February 2024 Existing Warrants, the Company issued an aggregate of 228,162 shares of its common stock and 228,162 February 2024 Replacement Warrants. The February 2024 Warrant Inducement closed on February 1, 2024 with the Company receiving net cash proceeds of approximately $2.2 million consisting of gross cash proceeds of $2.5 million, less cash equity issuance costs of approximately $0.3 million.

The February 2024 Warrant Inducement, which resulted in the lowering of the exercise price of the Existing Warrants and the issuance of the February 2024 Replacement Warrants, is considered a modification of the February 2024 Existing Warrants under the guidance of ASC 815-40. The modification is consistent with the Equity Issuance classification under that guidance as the reason for the modification was to induce the holders of the February 2024 Existing Warrants to cash exercise their February 2024 Existing Warrants, resulting in the imminent exercise of the February 2024 Existing Warrants, which raised equity capital and generated gross cash proceeds for the Company of approximately $2.5 million. As pursuant to the guidance of ASC 480 and ASC 815-40 the February 2024 Existing Warrants and February 2024 Replacement Warrants were classified as equity instruments before and after the modification, and as the modification is directly attributable to an equity offering, the Company recognized the effect of the modification of approximately $2.0 million as an equity issuance cost charged against the additional paid-in capital recognized from the associated warrant exercises. The amount of the equity issuance cost recognized for the warrant modification was determined using the Black-Scholes option pricing model as the incremental fair value of the modified February 2024 Existing Warrants and additional February 2024 Replacement Warrants issued as compared to the fair value of the original February 2024 Existing Warrants immediately prior to their modification.

The solicitation agent fees associated with the February 2024 Warrant Inducement consisted of: (i) a cash fee equal to 7.75% of the gross proceeds received by the Company, (ii) a common stock warrant to purchase such number of shares of common stock equal to 6% of the aggregate number shares issued pursuant to the exercise of the February 2024 Existing Warrants, or a total of 13,690 common stock warrants, with an exercise price of $10.97 per share, and a term offive years from issuance (the "February 2024 Solicitation Agent Warrants"), and (iii) $35,000 of out-of-pocket expenses. The fair value of the February 2024 Solicitation Agent Warrants was recognized by the Company as an equity issuance cost, which reduced the additional paid-in capital recognized from the issuance of common stock in connection with the exercise of the February 2024 Existing Warrants.

Total equity issuance costs recognized in the February 2024 Warrant Inducement of $2.4 million include cash equity issuance costs of $0.3 million, non-cash warrant modification costs of approximately $2.0 million, and non-cash issuance costs associated with the February 2024 Solicitation Agent Warrants of $0.1 million.

Common Stock Warrants Outstanding and Warrant Activity

The Company accounts for the majority of its warrants as equity-classified in accordance with ASC 480 and ASC 815-40. The Company’s outstanding common stock warrants that are equity-classified are included as a component of stockholders' equity based on their relative fair value on their date of issuance. Common stock warrants accounted for as liabilities in accordance with the authoritative accounting guidance are included as noncurrent liabilities in the consolidated balance sheets.

The following table summarizes the Company's outstanding and exercisable common stock warrants as of December 31, 2025:

(1)The pre-funded common stock warrants outstanding as of December 31, 2025 have a perpetual term and are therefore excluded from the calculation of the weighted average remaining contractual life.

Of the outstanding common stock warrants, only the Series 2 Warrants include a down round feature whereby they are subject to price reset provisions in the event future sales of the Company's securities are sold at a price per share less than the exercise price of such warrants.

The following table summarizes all common stock warrant activity for the year ended December 31, 2025:

(1)The pre-funded common stock warrants that are outstanding as of December 31, 2025 and December 31, 2024 have a perpetual term and are therefore excluded from the calculation of the weighted average remaining contractual life.

6. Equity Incentive Plans

In 2013, LBS adopted the 2013 Employee, Director, and Consultant Equity Incentive Plan, (as amended and restated, the “2013 Plan”). No further awards will be made under the 2013 Plan.

In April 2021, the Company’s shareholders approved the Palisade Bio, Inc. 2021 Equity Incentive Plan (the “2021 EIP”). As of December 31, 2025, there wereno shares of the Company's common stock available for future issuance as equity-based awards under the 2021 EIP, which excludes the subsequent evergreen share increase in the number of shares of common stock available for issuance under the 2021 EIP that occurred on January 1, 2026.

Also in April 2021, the Company's shareholders approved the 2021 ESPP. All employees are eligible to participate in the 2021 ESPP while employed by the Company. The 2021 ESPP permits eligible employees to purchase common stock through payroll deductions, which may not exceed $25,000 in a calendar year or 5,000 shares of the Company's shares of common stock each offering period, as defined in the 2021 ESPP, at a price equal to 85% of the fair value of the Company's common stock at the beginning or end of the offering period, whichever is lower. The 2021 ESPP is intended to qualify under Section 423 of the Internal Revenue Code. As of December 31, 2025, there have been 31,032 shares of the Company's common stock issued under the 2021 ESPP. As of December 31, 2025, there were 21,464 shares of the Company's common stock available for future issuance under the 2021 ESPP, which excludes the subsequent evergreen share increase in the number of shares of common stock available for future issuance under the 2021 ESPP that occurred on January 1, 2026.

Compensation expense associated with the 2021 ESPP for the year ended December 31, 2025 and December 31, 2024 was approximately $31,000 and $19,000, respectively.

In November 2021, the Company's compensation committee of the Board adopted the Palisade Bio, Inc. 2021 Inducement Award Plan (the "2021 Inducement Plan"). The 2021 Inducement Plan was adopted in order to grant equity-based awards to individuals not previously employed by the Company, as an inducement to join the Company. As of December 31, 2025, there were 50,341 shares of the Company's common stock available for future issuance as equity-based awards under the 2021 Inducement Plan.

Stock Options

The fair value of options granted during the years ended December 31, 2025 and December 31, 2024 is estimated as of the grant date using the Black-Scholes option pricing model using the assumptions in the following table:

Risk-free interest rate. The Company bases the risk-free interest rate assumption on observed interest rates appropriate for the expected term of the stock option grants.

Expected dividend yield. The Company bases the expected dividend yield assumption on the fact that it has never paid cash dividends and has no present intention to pay cash dividends.

Expected volatility. Due to the Company’s limited operating history and lack of company-specific historical or implied volatility, the expected volatility assumption is based on historical volatilities of a peer group of similar companies whose share prices are publicly available. The peer group was developed based on companies in the biopharmaceutical industry.

Expected term. The expected term represents the period of time that options are expected to be outstanding. As the Company does not have sufficient historical exercise behavior, it determines the expected life assumption using the simplified method, which is an average of the contractual term of the option and its vesting period.

The following table summarizes stock option activity and related information under the 2013 Plan, the 2021 EIP and the 2021 Inducement Plan for the year ended December 31, 2025:

The weighted-average grant date fair value of options granted during the years ended December 31, 2025 and December 31, 2024 was $1.00 per share and $3.80 per share, respectively. The grant date fair value of the options vested during each the years ended December 31, 2025 and December 31, 2024 was approximately $0.2 million and $0.4 million, respectively.

Restricted Stock Units

Thefollowing table summarizes service-based RSU activity and related information under the 2021 EIP for the year ended December 31, 2025:

The grant date fair value of the RSUs vested during the year ended December 31, 2025 and December 31, 2024 was approximately $10,000 and $0.1 million, respectively.

In 2025, the Company issued certain RSUs with a cash settlement feature whereby until such time that there are sufficient shares of its common stock available under the 2021 EIP to settle all outstanding equity-based grants under the 2021 EIP, any RSUs issued with the cash settlement feature that vest prior to such time may be settled, at the Company's sole election, in shares of the Company's common stock or in cash based on the fair market value of the Company's common stock on the applicable vesting date. Upon the first occurrence of sufficient shares being available under the 2021 EIP, the settlement of the RSUs will be made exclusively in shares of the Company's common stock. As of December 31, 2025, including any shares which will become available upon future evergreens, the Company has the intent and ability to settle all of the RSU awards with a cash settlement feature in shares of the Company's common stock as of the underlying vesting dates and has therefore recognized the awards as equity-classified in accordance with ASC 718.

Performance Based Stock Units

As of December 31, 2024, a total of 2,952 PSUs remained unvested and outstanding. None of the PSUs vested during theyear ended December 31, 2025 and none were forfeited during the year. As of December 31, 2025, a total of 2,952 PSUs remain unvested and outstanding with a weighted-average grant price of $22.28 per share.

Share-Based Compensation Expense

The allocation of stock-based compensation for all stock option, RSU and PSU awards is as follows (in thousands):

To reduce the ongoing administrative burden and expense associated with the quarterly vesting of the Company's service-based RSUs, on May 28, 2024, the Company's Board approved the immediate accelerated vesting of all unvested service-based RSUs issued to employees that were outstanding as of that date. The accelerated vesting was accounted for as a Type I modification under ASC 718 and accordingly, in the second quarter of 2024 the Company recognized share-based compensation expense associated with the service-based RSUs subject to immediate vesting of approximately $129,000 in general and administrative expenses and approximately $125,000 in research and development expenses.

As of December 31, 2025, the unrecognized compensation expense related to outstanding options was $0.1 million, which is expected to be recognized over a weighted-average period of approximately 1.52 years. As of December 31, 2025, unrecognized compensation expense related to outstanding service-based RSUs was $43.5 million, which is expected to be recognized over a weighted-average period of approximately 2.78 years. As of December 31, 2025, there isno unrecognized compensation expense related to outstanding PSUs.

7. Collaborations and License Agreements

Research Collaboration and License Agreement with Giiant

On September 1, 2023, the Company entered into the Giiant License Agreement whereby the Company received an exclusive, worldwide license (with the right to sublicense in multiple tiers) to develop, manufacture, and commercialize substantially all of the assets of Giiant, including: (i) the PALI-2108 compound, and (ii) the PALI-1908 compound, and the associated intellectual property around each of the foregoing (the “Giiant Licensed Assets”). The Giiant License Agreement has a perpetual term.

Pursuant to the Giiant License Agreement, the Company and Giiant established a joint development committee (“JDC”), consisting of one Giiant appointee and two Company appointees. The JDC will be responsible for: (i) overseeing the day-to-day development of the Giiant Licensed Assets through Proof of Concept (as defined below), and (ii) creation and implementation of the development plan and development budget for such development (the “Giiant Development Plan”) and any amendments or updates thereto.

Prior to receiving regulatory approval to commence a Phase 1 clinical trial (as such term is defined in the Giiant License Agreement) (the “Proof of Concept”), each of the Company and Giiant was solely responsible for all costs and expenses incurred by such party for the joint development of the Giiant Licensed Assets, except as set forth in the Giiant Development Plan. Upon reaching the Proof of Concept, which occurred in October of 2024, the Company became solely responsible for all costs and expenses incurred for the development, manufacturing, regulatory and commercialization of the Giiant Licensed Assets.

For the year ended December 31, 2025, the Company recognized a net credit related to the joint development plan of approximately $1.1 million, which consisted primarily of funds received by the Company from Giiant pursuant to the joint development plan. For the year ended December 31, 2024, the Company recognized expenses of approximately$4.3 million related to the joint development plan. The Company recognizedno credits to its joint development expenses for payments from Giiant for the year ended December 31, 2024. Both the expenses related to the joint development plan and any credits for funds received by the Company from Giiant are included in research and development expenses in the consolidated statements of operations.

In instances where the expense determined to be recognized exceeds the payments made to Giiant, the Company recognizes an accrual of joint development expenses. As of December 31, 2025, the Company hadno joint development expenses accrued. As of December 31, 2024, the Company accrued joint development expenses of approximately $0.2 million in Accrued liabilities in the consolidated balance sheets.

Pursuant to the Giiant License Agreement, the Company is (i) required make certain payments upon the achievement of the development milestones (as set forth in the Giiant License Agreement), in either cash or shares of the Company’s common stock, at the Company’s election (“Giiant Milestone Payments”), and (ii) pay ongoing royalty payments of a mid-single-digit percentage of the adjusted gross proceeds, as defined in the Giiant License Agreement, upon the sales or sublicenses of any products developed from the Giiant Licensed Assets to third parties (“Giiant Royalty Payments”) (collectively, the Giiant Milestone Payments and the Giiant Royalty Payments are referred to as the “Giiant License Payments”). The Giiant License Payments are subject to a maximum payment cap in the very low eight-digit range, which will be increased or decreased on a dollar-for-dollar basis based on a formula related to the aggregate of development costs incurred by the parties (“Payment Cap”). On October 16, 2025, the Company determined that the first of the development milestones pursuant to the Giiant License Agreement, was achieved with the dosing of the first patient in the Company's Phase 1b clinical trial of PALI-2108 in a FSCD cohort. The Company settled this Giiant Milestone Payment in cash in the amount of $235,000 in the fourth quarter of 2025. As of December 31, 2025, one of the Giiant Milestone Payments remains, which could require the Company to make a payment in the low seven-digit range upon the achievement of the one remaining development milestone. There have been no other Giiant Milestone Payments made pursuant to the Giiant License Agreement.

In the event that Giiant desires to sell or assign any rights to receive the Giiant License Payments, they will be required to notify the Company of such offer or proposal (“Offer Notice”). The Company will then have a right of first refusal for thirty days from the receipt of such Offer Notice, to acquire the rights and obligations contained in such Offer Notice on the same terms.

The Company may unilaterally terminate the Giiant License Agreement for: (i) convenience, or (ii) a material breach by Giiant, that is not cured within the applicable notice period.

Giiant may unilaterally terminate the Giiant License Agreement only for a material breach by Company that is not cured within the applicable notice period provided however that upon the Payment Cap being achieved, that right will terminate and the Giiant License Agreement will become perpetual.

Co-Development and Distribution Agreement with Newsoara

Prior to the completion of the Seneca Merger, LBS entered into a co-development and distribution agreement with Newsoara, a joint venture established with Biolead Medical Technology Limited, as amended, (the “Newsoara Co-Development Agreement”). Pursuant to the Newsoara Co-Development Agreement (and subsequent assignment agreement), LBS granted or licensed Newsoara an exclusive right under certain patents to develop, use, sell, offer to sell, import, and otherwise commercialize licensed products (the “Newsoara Licensed Products”) for any and all indications in the People’s Republic of China, including the regions of Hong Kong and Macao, but excluding Taiwan (the “Territory”). The Newsoara Licensed Products only include the drug asset LB1148, which the Company ceased developing in August of 2023. The right includes the right to grant sublicenses to third parties, subject to LBS’ written consent, provided that both parties agreed that Newsoara would be permitted to use a certain partner for development purposes. The Newsoara Co-Development Agreement obligates Newsoara to initially use LBS as the exclusive supplier for all Newsoara’s requirements for Newsoara Licensed Products in the Territory. During the term of the Newsoara Co-Development Agreement, Newsoara may request to manufacture the Newsoara Licensed Products in the Territory, subject to satisfying certain conditions to LBS' reasonable satisfaction. LBS is obligated to approve Newsoara manufacturing rights without undue refusal or delay. The Company records the expense reimbursements from Newsoara for any research and development or manufacturing activities it performs under the Newsoara Co-Development Agreement as a reduction to research and development expenses once the reimbursement amount is approved for payment by Newsoara.

In consideration of the rights granted to Newsoara under the Newsoara Co-Development Agreement, Newsoara paid LBS a one-time upfront fee of $1.0 million. In addition, Newsoara is obligated to make (i) payments of up to $6.75 million in the aggregate upon achievement of certain regulatory and commercial milestones, (ii) payments in the low six-digit range per licensed product upon achievement of a regulatory milestone, and (iii) tiered royalty payments ranging from the mid-single-digit to low-double-digit percentage range on annual net sales of Licensed Products, subject to adjustment to the royalty percentage in certain events, including a change of control, the expiration of certain patents rights, and royalties paid by Newsoara third parties. To date, Newsoara has met all of its payment obligations under the Newsoara Co-Development Agreement.

During the years ended December 31, 2025 and December 31, 2024, the Company recognizedno license revenue from Newsoara under the Newsoara Co-Development Agreement.

The Newsoara Co-Development Agreement will expire upon the expiration date of the last valid claim of any licensed patent covering the Newsoara Licensed Products in the Territory. In addition, the Newsoara Co-Development Agreement can be terminated (i) by either party for the other party’s material breach that remains uncured for a specified time period after written notice or for events related to the other party’s insolvency, (ii) by LBS if Newsoara challenges or attempts to interfere with any licensed patent rights and, (iii) by Newsoara for any reason upon specified prior written notice.

License Agreements with the Regents of the University of California

Prior to the Seneca Merger, the Company has entered into three license agreements, as amended, with the Regents of the University of California (“Regents”) for exclusive commercial rights to certain patents, technology and know-how related to LB1148. Concurrent with the Company's decision to terminate the development of LB1148, on October 20, 2023 the Company terminatedtwo of its license agreements with Regents. As of December 31, 2025, the only license agreement remaining with Regents is that entered into with LBS in August 2015, as amended in December 2019 and September 2022 (the “2015 UC License”). The 2015 UC License was retained for the sole purpose of maintaining the Newsoara Co-Development Agreement under which the Company may receive future milestone or royalty payments through the term of the license. Accordingly, pursuant to the 2015 UC License, the Company is obligated to pay a percentage of non-royalty licensing revenue it receives from Newsoara under the Newsoara Co-Development Agreement to Regents ranging from 30 percent to 35 percent of one-third of the upfront payment and milestone payments received from Newsoara. During the year ended December 31, 2025, the Company recognizedno sublicense fees or license maintenance fees due to Regents. During the year ended December 31, 2024, the Company recognizedno sublicense fees and license maintenance fees of approximately $16,000 due to Regents. License maintenance fees are recognized in research and development expenses in the consolidated statements of operations.

The 2015 UC License will expire upon the expiration date of the longest-lived patent right licensed under the 2015 UC License. The Regents may terminate the 2015 UC License if: (i) a material breach by the Company is not cured within 60 days, (ii) the Company files a claim asserting the Regents licensed patent rights are invalid or unenforceable, or (iii) the Company files for bankruptcy. The Company also has the right to terminate the 2015 UC License at any time upon at least 90 days’ written notice.

Contingent Value Right

Immediately prior to the closing of the Seneca Merger, Seneca issued each share of its common stock held by Seneca stockholders of record, one contingent value right (“CVR”). The CVR entitled the holder (the “CVR Holder”) to receive, pro rata with the other CVR Holders,80% of the net proceeds, if any and subject to certain minimum distribution limitations (“CVR Payment Amount”), received from the sale or licensing of the intellectual property owned, licensed or controlled by Seneca immediately prior to the closing of the Seneca Merger (the “Legacy Technology”); provided however that the CVR Holders are only entitled to receive such CVR Payment Amount if the saleor licensing of such Legacy Technology occurred on or before October 27, 2022 (“Legacy Monetization”). Pursuant to the terms of the CVR agreement (“CVR Agreement”), CVR Holders entitlement to receive CVR Payment Amounts expired on April 27, 2025. There were no CVR Payments made to any of the CVR Holders pursuant to the CVR Agreement.

NSI-189 – Exclusive License and Subsequent Exercise of Purchase Option

Prior to the Seneca Merger, Seneca exclusively licensed certain patents and technologies, including a sublicense covering a synthetic intermediate, of the Company's NSI-189 assets (“189 License”), along with a purchase option through December 16, 2023 (“Purchase Option”). On October 22, 2021, Alto Neuroscience ("Alto") agreed to terms of an early exercise of the Purchase Option under the 189 License and entered into an asset transfer agreement ("ATA"). Alto is a U.S. based public, clinical-stage biopharmaceutical company with a mission to redefine psychiatry by leveraging neurobiology to develop personalized and highly effective treatment options.

Pursuant to the ATA, Alto will be required to pay the Company up to an aggregate of $4.5 million upon the achievement of certain development and regulatory approval milestones for NSI-189 (or a product containing or otherwise derived from NSI-189), which is now known as ALTO-100. If Alto sells or grants to a third party a license to the patents and other rights specific to ALTO-100 prior to the achievement of a specified clinical development milestone, Alto will be required to pay to the Company a low-double digit percentage of any consideration received by Alto from such license or sale, provided that the maximum aggregate consideration Alto will be required to pay to the Company under the ATA, including the upfront payment and all potential milestones and transaction-related payments, will not exceed $5.0 million.

On October 22, 2024, Alto announced that its Phase 2b study of ALTO-100 in patients with major depressive disorder (MDD) did not meet its primary endpoint. Notwithstanding, ALTO-100 is being evaluated as an adjunctive treatment in a Phase 2b study in bipolar depression with topline data expected in the second half of 2026. Upon the enrollment of a patient in a Phase 3 clinical trial of ALTO-100, if it occurs, a milestone payment of $1.5 million will be due to the Company from Alto under the ATA.

NSI-532.IGF-1

On October 27, 2022, the Company entered an agreement to license NSI-532.IGF-1 to the Regents of the University of Michigan ("University of Michigan") for maintaining NSI-532.IGF-1 cell lines, continued development, maintaining patent protection, and seeking licensees. The Company receivedno upfront fees for the license. NSI-532.IGF-1 is a preclinical cell therapy being investigated as a potential therapy for prevention and treatment of Alzheimer’s disease. The University of Michigan shall bear 100% of the costs for patent filing, prosecution, maintenance, and enforcement of the patent rights. The Company will receive 50% of net revenues received by the University of Michigan from the licensing of patent rights through the last-to-expire patent in patent rights, unless otherwise earlier terminated, less all reasonable and actual out-of-pocket costs incurred in the litigation of patent rights.

8. Commitments and Contingencies

Corporate Office Lease

The Company was party to a non-cancelable facility operating lease (the "Corporate Office Lease") of office space for its corporate headquarters in Carlsbad, California. The initial contractual term was for 39-months commencing on June 1, 2022 and the lease expired on August 31, 2025. The Company has determined it will not enter into a new lease for its corporate office space.

The Company recognized operating lease expense associated with its Corporate Office Lease of approximately $87,000 and $130,000 for the years ended December 31, 2025 and December 31, 2024, respectively.

Insurance Financing Arrangement

In June of 2025, the Company entered an agreement to finance an insurance policy that renewed in May of 2025. The financing arrangement entered in June of 2025 has a stated annual interest rate of 7.82% and is payable over a 9-month period with the first payment payable on June 30, 2025. The insurance financing arrangement is secured by the associated insurance policy. As of both December 31, 2025 and December 31, 2024, the aggregate remaining balance under the Company's insurance financing arrangements in place at each time was approximately $0.1 million and is included in Insurance financing debt in the consolidated balance sheets.

Other than the remaining insurance financing arrangement payments due in 2026, as of December 31, 2025 the Company has no other minimum debt payments required in 2026 or thereafter.

Legal Proceedings

From time to time, the Company may be involved in various lawsuits, legal proceedings, or claims that arise in the ordinary course of business. Management believes there are no claims or actions pending against the Company through December 31, 2025, which will have, individually or in the aggregate, a material adverse effect on its business, liquidity, financial position, or results of operations. Litigation, legal proceedings or claims, however, are subject to inherent uncertainties, and an adverse result in such matters may arise from time to time that may harm the Company’s business.

9. Net Loss Per Share

Basic and Diluted Net Loss Per Common Share

Basic net loss per common share is computed by dividing net loss available to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share is calculated by dividing the net loss available to common stockholders by the weighted-average number of shares of common stock outstanding during the period, plus any potentially dilutive common shares, consisting of stock-based awards and equivalents, and common stock warrants. For purposes of this calculation, stock-based awards and equivalents and common stock warrants are considered to be potential common shares and are only included in the calculation of diluted net loss per common share when their effect is dilutive.

The Company's Series A Convertible Preferred Stock and certain of the Company's outstanding common stock warrants contain non-forfeitable rights to dividends with the common stockholders, and therefore are considered to be participating securities. The Series A Convertible Preferred Stock and the common stock warrants do not have a contractual obligation to fund the losses of the Company; therefore, the application of the two-class method is not required when the Company is in a net loss position but is required if the Company is in a net income position. When in a net income position, diluted net earnings per common share is computed using the more dilutive of the two-class method or the if-converted and treasury stock methods.

Pursuant to the October 2025 Offering, on October 2, 2025, the Company issued the October 2025 Offering Pre-Funded Common Stock Warrants. Pursuant to the December 2024 Offering, on December 13, 2024, the Company issued the December 2024 Offering Pre-funded Common Stock Warrants. See Note 5, Stockholders' Equity, for further discussion of each of these financing transactions. Both the October 2025 Offering Pre-funded Common Stock Warrants and the December 2024 Offering Pre-funded Common Stock Warrants were determined to be equity-classified in accordance with ASC 480 and ASC 815. As of December 31, 2025 and December 31, 2024,50,080,853 of the October 2025 Offering Pre-funded Common Stock Warrants and 2,027,000 of the December 2024 Offering Pre-funded Common Stock Warrants, respectively, remained unexercised. Pursuant to the guid ance of ASC 260-10, the Company concluded that because the equity-classified pre-funded warrants were immediately exercisable for little orno cash consideration due to the non-substantive stated exercise price, all the necessary conditions for issuance of the underlying common shares had been met when the pre-funded warrants were issued. Therefore, the underlying common shares for the unexercised portion of the October 2025 Offering Pre-funded Common Stock Warrants have been included in the denominator for the calculation of basic and dilutive net loss per common share for the year ended December 31, 2025, and the underlying common shares for the unexercised portion of the December 2024 Offering Pre-funded Common Stock Warrants have been included in the denominator for the calculation of basic and dilutive net loss per common share for the year ended December 31, 2024.

As the Company was in a net loss position for all periods presented, basic and diluted net loss per common share for both the years ended December 31, 2025 and December 31, 2024 was calculated under the if-converted and treasury stock methods. For both the years ended December 31, 2025 and December 31, 2024, basic and diluted net loss per common share were the same as all common stock equivalents other than the pre-funded warrants discussed above were anti-dilutive for both years.

The following table presents the calculation of weighted average shares used to calculate basic and diluted net loss per common share (in thousands, except share and per share amounts):

The following potentially dilutive securities were excluded from the calculation of diluted net loss per share because their effects would be anti-dilutive:

10. Employee Benefits

The Company participates in a defined contribution 401(k) plan adopted by LBS effective June 20, 2016 (the "LBS 401(k) Plan"). All employees are eligible to participate in the plan beginning on the first day of employment. Under the terms of the plan, employees may make voluntary contributions as a percent of compensation. No matching contributions were made by the Company the years ended December 31, 2025 and December 31, 2024.

Effective as of January 1, 2026, the Company's compensation committee of its Board amended the LBS 401(k) Plan to provide for the Company to make matching contributions in an amount equal to 100% of employees voluntary deferral contributions that are not over 6% of eligible compensation.

The Company's common stock is not an investment option available to participants in the 401(k) Plan.

11. Income Taxes

The Company has no current or deferred income taxes as of December 31, 2025 and December 31, 2024.

Income taxes vary from the statutory federal income tax rate applied to loss before income taxes as follows (in thousands):

Deferred income tax assets and liabilities arising from differences between accounting for financial statement purposes and tax purposes, less valuation reserves at year end are as follows (in thousands):

Deferred tax assets and liabilities are recognized for temporary differences and unused tax losses to the extent that realization of the related tax benefits is more-likely-than-not. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods when the deferred tax assets become deductible. After considering the history of operating losses and uncertainty regarding its ability to generate positive pre-tax income in 2026 and beyond, the Company has concluded that it is not-more-likely-than-not that its deferred tax assets will be realized, and therefore maintains a full valuation allowance on all deferred tax assets.

The valuation allowance decreased $5.2 million during the year ended December 31, 2025 and increased $3.5 million during the year ended December 31, 2024.

As of December 31, 2025, the Company had federal net operating loss ("NOL") carryforwards of approximately $93.8 million and state NOL carryforwards of approximately $14.9 million. Of the total amount of federal NOL carryforwards, approx imately $85.8 million arose in tax years beginning after December 31, 2017 and will carry forward indefinitely. The federal NOL carryforwards arising in tax years beginning before January 1, 2018 of approximately $8.0 million will begin to expire in 2026 unless previously utilized. The Company’s state NOL carryforwards as of December 31, 2025 may be carried forward for 20 years, and will begin to expire in 2027.

Pursuant to the provisions of the Internal Revenue Code ("IRC"), the Company’s NOL and tax credit carryforwards and certain other attributes are subject to review and possible adjustment by the Internal Revenue Service ("IRS") and state tax authorities. NOL and tax credit carryforwards may be subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant stockholders over a three-year period in excess of 50 percent, as defined under Sections 382 and 383 of the IRC, as well as similar state provisions. This could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. Further, when there are multiple ownership changes, all resulting limitations must be applied to the attributes that existed prior to the ownership change. Since its inception, the Company has completed the Seneca Merger and several equity offerings, including the October 2025 Offering, which may have resulted in a change in control as defined by Sections 382 and 383 of the IRC, or could result in a change in control in the future. The Company has not performed a complete IRC Section 382 and 383 analysis for all relevant tax years regarding the limitation of net operating losses. Although the NOL deferred tax asset does reflect the limitation resulting from both the Seneca Merger and the October 2025 Offering, there could be further limitations due to prior changes in control. Due to the existence of a full valuation allowance, however, changes in the NOLs included as deferred tax assets on the Company’s consolidated balance sheets would have no impact on the Company's effective tax rate.

The Company files income tax returns in the U.S. federal jurisdiction and California. Because of the NOLs, the Company is subject to U.S. federal examinations for tax years 2007 and forward, and for examinations from state taxing authorities for tax years 2008 and forward.

The Company accounts for taxation under ASC 740, which clarifies the accounting for uncertain tax positions. ASC 740 requires that the Company recognize the impact of a tax position in its consolidated financial statements if the position is more-likely-than-not to be sustained upon examination based on the technical merits of the position. The Company didnot have any uncertain income tax positions as of December 31, 2025 and 2024.

ASC 740 requires the Company to accrue interest and penalties where there is an underpayment of taxes based on the Company's best estimate of the amount to ultimately be paid. The Company identified no unrecorded material uncertain tax positions as of December 31, 2025 and 2024, consequently no interest or penalties have been accrued by the Company in either period. The Company does not anticipate a significant change to its unrecognized tax benefits within the next 12 months.

12. Segment Information

The Company operates asone operating and reportable segment, focused on the research and development of novel therapeutics for patients, including the advancement of PALI-2108 through clinical trials. The Company did not aggregate multiple operating segments into its one operating segment. The Company’schief operating decision maker (“CODM”) is its chief executive officer.

The Company's CODM uses Net loss that is reported on the consolidated statements of operations for the purposes of assessing performance, allocating resources and planning, monitoring budget versus actual results, and forecasting future periods. The Company’s CODM views specific program spend within research and development expenses, research and development spend that is not allocated to specific programs, as well as general and administrative expenses as significant segment expenses. As a pre-product revenue company, the CODM considers budget versus actual results for expenses that are deemed significant and cash forecast models for assessing performance and to decide the level of investment in the Company’s operating and capital allocation activities.

In addition to significant expense categories included in Net loss, the Company regularly provides disaggregated significant expense amounts that comprise operating expenses to the CODM to assist when managing the Company's single reporting segment. A reconciliation to consolidated operating expenses for the years ended December 31, 2025 and 2024 is included in the table below (in thousands):

PALI-2108 program expenses are those expenses directly related with the development of the Company's only asset currently under development, PALI-2108. Legacy program expenses are those expenses directly related to its legacy assets, primarily LB1148, which the Company ceased developing in August of 2023. Other research and development expenses includes primarily salary and employee-related costs and benefits and research and development facility expenses, which are not allocated to specific programs, and non-cash loss or gain associated with changes in the fair value of the Company's contingent consideration obligation. Other general and administrative expenses consist primarily of salary and employee-related costs and benefits, legal professional fees expenses, investor and public relations expenses, accounting and audit services, insurance costs, director and committee fees, and general corporate expenses. Excluded from other general and administrative expenses are intellectual property expenses and business development expenses that are allocated to program expenses.

For the years ended December 31, 2025 and 2024, the other segment items that the Company used to aggregate Total operating expenses to arrive at Net Loss as shown on the consolidated statement of operations include Interest expense and Other income, net.

The Company does not provide separate segment asset information to the CODM because the CODM does not review segment assets at a different asset level or category than those shown on the consolidated balance sheets. All of the Company’s assets are located in the U.S.